In a bid to improve mobile services and to reduce tariff rates, which are among the highest in southern Africa, the Malawi government recently launched an international tender for a fourth mobile phone operator. In fact, they have been trying to increase the number of mobile phone operators to four since May 2008. But is this the best way to improve service and reduce tariff rates?
The view that tariff rates are very high in Malawi was also corroborated by the Information Communication Association of Malawi (ICTAM) interim President Derek Lakudzala. Mr Lakudzala points out that the high tariffs, among other things, are due to expensive infrastructure such as towers which is not shared among operators and, therefore, a lot of unnecessary cost is passed on to the consumer. A number of people in my network on Facebook have also mentioned this problem.
Mr Lakudzala further says purely pushing the blame entirely on the operators is not correct either. He says tax policy regimes and regulatory frameworks also play a role. On his part, ZAIN Malawi Managing Director Fayaz King says reduced taxes and wooing more customers to existing network would enable companies to reduce airtime prices.
The duplication of expensive infrastructure can be sorted out easily. Operators should be asked to share space on towers. Government must also consider reducing tax for mobile operators. By the way, how are the tax policy regimes for mobile operators in neighbouring countries?
When I was in Malawi, I used to see a lot competition between Celtel (now ZAIN) and TNM mainly through different kinds of promotion campaigns. One would expect the same competition to force them to reduce tariff rates in order to enlarge their respective subscriber bases. The fact that this is not happening seems to suggest that there are some underlying problems not necessarily to do with lack of competition. The fact that both of them choose to erect their own towers in places where they could have easily shared one tower also shows they are actually trying to outdo each other, albeit at the expense of the wananchi.
The authorities have to find out the kind of profits that these operators are making. If they are making outrageous profits, and do not want the benefits to trickle down to their subscribers, then PROBABLY there is some kind of collusion between the two. But then if they were able to make such clandestine agreements, they would also easily agree to start sharing tower space in order to minimize costs. But never say never.
If the authorities find out that these operators are making abnormal profits, they can ask them to reduce their rates. Otherwise, the introduction of more operators will not help at all as the new operators will just join the existing set-up. Apart from that, they will also erect their own towers and pass the running costs to the subscribers. Therefore, no work done.
If the operators are making losses or marginal profits, then their high tariff rates are to some extent justified. Otherwise, how do we expect them to remain afloat? The introduction of new operators in such an environment will be counter-productive as it will trigger a further rise in tariff rates. Therefore, government has to tread carefully on this issue. My view is that three mobile operators will be great. Four will be an overkill for an economy of the size of Malawi.
MACRA could learn a lesson or two from the Korea Communications Commission (KCC). In 2007, mobile phone bills in South Korea were the most expensive in OECD countries. The Korean government, initially, resorted to promoting increased competition through deregulation in order to lower mobile tariffs. But this resulted in many discounting announcements, while tariff charges became more complex and mobile phone charges actually increased.
Since last year, KCC has adopted a new approach. They are now discussing the reduction of mobile phone charges directly with operators. These discussions are already paying dividends as three operators have reduced their tariffs and related charges.
In a related development, my US based readers can pick the best phone plans by checking out mobile device reviews.
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14 users commented in " Does Malawi really need 4 mobile phone operators? "
Follow-up comment rss or Leave a TrackbackGovernment must also ensure that there is no back-door price fixing by the mobile operators. That is to say that the 4 mobile operators agreeing on a price mark – maximum and minimum. Do we have a watchdog to monitor this? Is it the Consumers Association of Malawi or Malawi Communications Regulatory Authority?
If these are the organisations then they need a serious face-lift because on the current evidence they are incapable of undertaking this task. If they are good enough then the current 3 mobile operators would have been enough.
Also, who is to answer as to why Malawi is the most expensive country in Southern Africa. Is it because other countries have more operators than Malawi? This must be investigated in order for Malawi to make an informed decision on its next move.
We need a regulation whereby the profits that these companies make must measure against people’s average income. Also, these companies must be obliged to declare their annual profits/losses – only this would substantiate whether the prices are justified or not and not only mentioning transmitters that people don’t know its cost. These are measures to be taken if the government seriously wants fair deal for its people.
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[...] wonders whether Malawi needs four mobile phone operators as the government launches an international tender for a fourth mobile phone operator. Cancel [...]
You ask an interesting question: “If the operators are making losses or marginal profits, then their high tariff rates are to some extent justified. Otherwise, how do we expect them to remain afloat?”
The myth of the efficient market is just that: a myth!
Manage the telephone system an essential service.
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There is more to it, besides the issue of sharing towers, A single tower has attached to it a Base Transceiver Station Equipment(BTSE), cables, GSM antennas,rectifiers,a bank of standby batteries (6hrs life capacity), and a standby generator, including an expensive (set)s of microware transmission equipment to link that tower to the Base Station Controller( BSC) which is usually remotely located at the switching centre. Sometimes depending on the cost benefit analysis,you may have to lease transimission links from national operators like MTL. Further to this is Mobile Exchange ( MSCE) itself. Amongst all these three entities, The BSC and MSCE are much more fixed assets, where as additional BTSE and associated equipment has to be purchased for each and every new tower the operator brings up into operational. Now these entities are not sourced locally, they have to be purchased from vendors like Ericsson, Huawei,Nokia Siemens Networks etc. Now whenever you enter into any contract with these vendors its like you are locked on to them. Because its not only about purchasing equipment, you also pay for items like equipment license fees, further to that, the contract necessitates that you have upgrade the equipmet with new software and or replacement hardware periodically, else you risk loosing customer support functions with the vendor and these come at a cost also. Additionally you also need to procure a separate billing platform, whose conditions are much more similar to the other sets of equipment. As if this is not the end, you also need to purchase consumable assets like simcards, topup scratchcards which unfortunately have to be imported also for a case of Malawi. If you look at all these expenses, in additional operational expenses, you can agree with me that the operators spends billions of kwachas, just to put up and maintain equipment the equipment.
Such being the case, the issue of affordability of the service becomes an issue to the market. If you look at our population, say at 14m, each of the operators may need to have atleast 3m subscribers in order to take advantage of the economies of scale, because the Total Network cost per subscriber will be very low with such a large number of subscribers, and therefore the operators may be able to operate comfortably, and move with time, as it is the case with Vodacom, MTN and CellC in SA. But as it is the case with Malawi now, the total number of subscribers Zain and TNM could be below 4m, as such that entails that the network cost per subscriber is still high, as such will mean that our calling rates will still be on the higher side.
In 2008 govt enacted a policy shift to eliminate custom duty charges on the importation of handsets replacing it with an increased tax rate charge on a phone call per minute. In response to this both Zain and TNM embarked on a campaign to woo subscribers through promotions, the response was quite overwhelming to ask extent that the networks were congested. This increased the subscriber figures, but still it seems there is still more room for improvement, because less than half of the whole population has got mobile phones.
Until our usage per subscriber is high enough, unfortunately that will mean that subscribers have quite substantial amount of income to spend on calls. Each time we bring in a new operator, bare in mind that we actually increasing the Total Network Costs per subscriber, and that will not be healthy for the operators themselves.
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Additional service providers usually expand the market and volume of traffic and this enables them to bring down prices based on larger volume. Competition, monitored to ensure that cabals are not formed to fix prices, usually ensure that prices come down and service levels go up.
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More Competition is good in general as long as there is no price fixing among so-called competitors. Let consumers decide the price.
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I think it can help, but also some goverments try to make cash from mobile comunications or international calls. For example, incoming international calls to Cuba have a very high tax because this way they get money from people working abroad.
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Four mobile phone operators is just too much for a place with only a few people living on it.
One or two mobile companies will do.
Just a thought
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The more the better in my own opinion, initial infrastructure costs will keep the costs high, but and I say but if there is no price fixing between the operators its will be a good outcome for the consumers.
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Honestly these people need the help of Mr. Msiska! The great, motivated man in the past blog…
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Well, right now in France we have just 3 operators, and the problem is that they more or less discretly agreed to keep prices quite high. Now there are talks about having a 4th operator to enhance the competition and lower the prices, and I have to say a lot of people are enthusiastic about it.
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In the UK the monopolies comission has had to force mobile providers to put price down.
People can’t live without their mobile phones and will pay to use them.
USA is really cheap for mobile calls. Most packages give free calls now.
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It does seem bizarre introducing a 4th service to a country of 15m people! According to the CIA factbook in 2008 Malawi had just 1.8m cell phone users, I guess it’s gone up a bit since then but do you need 4 companies fighting over 2.5m subscribers!
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We need a regulation whereby the profits that these companies make must measure against people’s average income. Also, these companies must be obliged to declare their annual profits/losses – only this would substantiate whether the prices are justified or not and not only mentioning transmitters that people don’t know its cost. These are measures to be taken if the government seriously wants fair deal for its people.
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